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Nigeria: An Alternative Energy Source For The European Union?
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By Gustavo Placido Dos Santos
Recent events in Ukraine and the threat posed by the European Union’s dependency on Russian energy — Moscow supplies a quarter of Europe’s needs for natural gas, 80% of which runs through Ukrainian territory — has led Brussels, and EU’s city-capitals, to consider alternative sources towards alleviating the dependency and thus increasing Europe’s energy security. Beyond Russia and European indigenous production — which accounts for 33% of the EU’s usage of natural gas—Europe’s five largest partners are Norway (22%), Algeria (9%), Qatar (6%) and Nigeria (2%).1 One can notice that the small share of Nigerian natural gas out of the total European imports does not correspond to Abuja’s real capacity and potential in becoming a strategic energy partner.2
In fact, the Nigerian government aspires to do just that. On the sidelines of the ministerial meeting of the EU-OPEC energy dialogue, which took place in Brussels in June 2014, Nigeria’s Petroleum Minister, Diezani Alison-Madueke, said “[t]he Federal Government restated its resolve to support the long term gas supply security for the European Union countries as part of measures to expand the nation’s gas market”.3
This strategic approach towards the European market is, on the one hand, a sign that the government in Abuja recognizes Europe’s energy market potential — the EU’s aspiration to diversify energy sources has motivated such an approach — and, on the other hand, is a product of recent developments in the global natural gas market. Among these developments the United States’ shift to the domestic exploration of shale gas, and Mozambique’s affirmation as a major player in the natural gas market4 are key. Being one of the most promising African countries, in terms of energy, the fact that Mozambique is located on the Indian Ocean’s shoreline has driven Asian powers to increasingly focus their attentions towards Maputo.5 Also worth noting is that Asia currently represents Nigeria’s main natural gas export market.6
For Nigeria, satisfying European natural gas needs implies an increase in the production of the resource. With that purpose in mind, Abuja has in motion plans to build additional LNG production infrastructures—apart from Bonny LNG, the only one currently in operation—such as the Olokola LNG, the Brass LNG and the Train 7 at Bonny LNG. To make these projects operational, the government must put an end to the constant delays and settle the years-long stalemate over the Petroleum Industry Bill.7 Failing to overcome these obstacles may result in Nigeria losing ground to international competition.
Among the potential major beneficiaries of Nigeria’s strategic shift are Portugal and Spain. While Lisbon and Madrid are already the two largest European importers of natural gas sourced in Nigeria,8 they also belong to the small group of EU countries that do not import Russian gas. Since they don’t depend on energy from Russia, Lisbon and Madrid will have, at least in principle, a greater margin of manoeuvre in fomenting deeper ties between the EU and Nigeria. That will require, however, grand investments in terms of infrastructure construction and development — something which poses a considerable obstacle.9 Equally relevant is the fact that the Nigerian alternative is not risk-free regarding Europe’s goal of attaining energy security, in particular when considering piracy in the Gulf of Guinea and the fragile stability and security in the Niger Delta.10
Despite the focus on LNG, Nigeria also intends to bolster gas exports to Europe by building the Trans-Saharan Gas Pipeline (TSGP) that will connect the Niger Delta — home to the bulk of Nigeria’s gas reserves — to Algeria,11 and on to Europe via already existent gas pipelines. It is estimated that the TSGP will cost US$20 billion. According to the feasibility report, the TSGP will be more competitive than the GNL option, since operational costs will be inferior and waste less natural gas. The report adds that the pipeline’s “critical advantage” is the ability to supply gas to African regions that are often affected by high energy prices and desertification.12
Nevertheless, despite the alleged advantage in terms of costs, the project’s development faces several obstacles. To start with, finding the US$20 billion dollars to finance the TSGP will be a difficult task. Secondly, some militant groups in the Niger Delta oppose the allocation of funds for the project before the economic and social problems in the region are properly dealt with.13 Thirdly, some analysts believe that the quantities carried by the gas pipeline will exceed European demand.14 Lastly, the region through which the pipeline crosses includes extremely volatile centres of instability.15
Adding to these factors, the Russian energy company Gazprom has a stake in the pipeline project. Hence, importing gas via a company in which Gazprom has interests goes against the EU’s goal of reducing dependency on Russian energy.
In short, to diversify energy sources implies widening the number of energy suppliers. As such, Nigeria appears to be a viable option and a potential strategic partner that would contribute to European energy security. In fact, when weighing the variables at stake it becomes clear that the GNL option is more advantageous to Europe than the TSGP. Nevertheless, it would be a mistake to completely exclude from the equation the risk posed by instability in Nigeria. The social and political tensions are far from becoming things from the past. Having said this, the risk factors and the opportunities will not fail to be taken into account by the EU in its interaction with Abuja.
* Published also in Portuguese: Gustavo Plácido dos Santos, “Nigéria: uma fonte alternativa de energia para a União Europeia?” (IPRIS Comentário, No. 13, Novembro de 2014).
About the author:
Gustavo Placido Dos Santos
Portuguese Institute of International Relations and Security (IPRIS)
SOURCE: http://www.eurasiareview.com/19112014-nigeria-alternative-energy-source-european-union-analysis/
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Sahara gas pipeline gets go-ahead
3 July 2009 BBC
Nigeria, Niger and Algeria have signed an agreement to build a multi-billion dollar pipeline to take Nigerian gas across the Sahara to the Mediterranean.
The giant project, which will cost an estimated $13bn (£8bn), aims to deliver up to 30 billion cubic metres of gas per year for the European market.
France’s Total, Anglo-Dutch firm Shell, and Russia’s Gazprom have all expressed an interest in investing in the scheme.
The pipeline will run for 2,580 miles (4,128km) through the three countries.
BBC Africa analyst Richard Hamilton says that when built, it will be one of the great feats of engineering in the world and dwarf several existing pipelines, such as the one beneath the North Sea.
He says one concern is security, as a pipeline could be a target for Tuareg rebels or al-Qaeda in North Africa, both of whom are active among the unpatrolled expanses and porous borders of the Sahara.
Russian concerns
Energy analysts say there has been interest in this project for many years, but lack of investment and an unclear regulatory environment in Nigeria meant that the plans stayed firmly on the drawing board.
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Algeria’s energy minister says funding will not be a problem
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European Union nations now hope it will enable them to diversify their gas supplies – and most pressingly, reduce their reliance upon Russian gas – but many analysts say Gazprom may have a head start in participating in the scheme.
This is because only last week, Gazprom signed a separate $2.5bn deal with Nigeria’s state-owned gas firm NNPC to build new gas refineries, pipelines and power stations in Nigeria.
European Union states are keen to reduce their reliance upon Russian gas because of Gazprom’s numerous price disputes in recent years with Ukraine.
These rows have seen Gazprom temporarily cut supplies to Ukraine, which in turn has reduced Russian gas deliveries to western Europe that are piped through Russia’s neighbour.
“We have the expertise and I don’t think there is a problem with finance in this project,” said Algerian Energy Minister Chakib Khelil.
Nigeria has estimated natural gas reserves of 180 trillion cubic feet, the seventh-largest in the world.
SOURCE: http://news.bbc.co.uk/2/hi/business/8132823.stm
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New World Order G20 